Thoughts on the banking system of Upper Canada, and on the present crisis [microform]

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THOUGHTS

on

THE BANKING SYSTEM

OF

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AM> 01T

THE PRESENT CRISIS.

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TORONTO!
PRINTED FOR THE AUTHOR.

1837.

'♦'■ ^

TO THE HONORABLE

THE LEGISLATIVE COUNCIL

AND

HOUSE OF ASSEMBLY

OF

UPPER CANADA.

These observations on the important subject upon which they are about to Legislate

ARE RESPECTFULLY INSCRIBED

By their most obedient Servant,

THE AUTHOR.

m

'

THOUGHTS

ON

THE BANKING SYSTEM, &c;

In times like the present when the deepest anxiety prevailsj
timongst all classes of the community, as to the result of the
approaching Session oi Parliament, which has been called in
respondeuce to simultaneous addresses from all parts of the
Province, we shall perhaps not be considered obtrusive in oiFering
a few observations to the public^

We believe that the opinions which we shall advance, will
harmonize with the admitted truths of Political Economy, but
are at the same time convinced that they will be at variance with
the views of those who, being directly interested in opposing them^
have unfortunately but too much influence in doing so with effect.
We shall be happy indeed if our opponents will discuss the question
in a spirit of candour and forbearance* and the result, we feel
assured, will be that the great mass of the community will be much
better informed on the important subjects on which we shall treat
than they have hitherto been. AVe candidly admit, at the outset,
that having been always an advocate for free trade to the most
unlimited extent, we see no reason to depart from our general
principles, as far as Banking is concerned. We are then for
perfect freedom in Banking, but let it not be supposed, that we
object to proper restrictions, not inconsistent with that perfect
freedom which we advocate. We do not object to Companies
associating for Banking purposes, being obliged to register the
names of their partners, to their declaring their nominal capital, and
the amount paid in, to their making returns of their liabilities to the
public at stated intervals, nay, we should not object to their being
obliged to give security for their issues, provided all other Com"
panics were obliged to do the same ; but while chartered Companies^
wholly irresponsible, ore allowed to issue paper, we cannot lee any

4

propriety in calling on Companies whose partners are fully
responsible, for any furlhrr security than their genetal liabilities for
all the engagements of the Company to which they belong. Our
arguments in favour of Free Banks are— 1st. That we believe the
security to the public is greater than under any other system, and
consequently that there will be more confidence in Joint Stock
Banks than in any other, in times of difficulty.

2nd. We are against all monopolies. We can see no reason,
why the privilege of issuing paper, intended to pass as money and
which is the representative of gold and silver, should \ie extended
to one individual, or one corporation, more than to another.

3rd. We believe that a Free Banking system woutd have the
effect of bringing British Capital into the Province. We hare
heard from the highest authority, of the " redundant wealth of the
Mother Country." We cannot say we have yet heard of the
redundant wealth oi Upper Canada. We believe that the true
method of "attracting" that wealth to Upper Canada, would be to
do away with the Usury laws and to allow perfect freedom of
trade in Banking. We know that Banking Corporations divide
12 per cent per annum and yet no individual is allowed to take
more than 6 per cent. Had we perfect free trade in money, capital
would flow here as long as it would bring 7 or 8 per cent. We
have heard it repeatedly stated that there are Banks enough ii) the"
Province and that the more there are the more difficult it is to get
accommodation.

We cannot perceive the truth of the assertion. We know there
ii abundance of good paper in the best of times which the Banks
cannot discount, and we cannot admit there is too much Banking
capital until wo find the Banks seeking foi paper to discount and
the rate of interest coming down as it does in England, when-
money is plenty. We confess we should wish to see the mercan-
tile community more independent of the Banks than they are. We
should like to see the latter made to feel the value of a good ac'
count, and the merchants able to demand, aye, to insist upon that
accommodation which they have a right to expect. We think theee
results would be produced by competition and we would not check
that competition. We proceed to consider the leading objections to
Free Banking, & 1st. The grand one which is in the mouths of all its

6pi)on«nts— namely, that the best guarantee to the public is a paid
up Capital and that responsibility is of secondary consequence.
We shall perhaps destroy this argument most effectually, by admit-
ting its truth. We deny that the supporters of Joint Stock Banks
here or elsewhere inculcate any such notion, or that their Constitu-
tions " frrdain any sitcJi absurdity" as that a paid up Ccpital is
ijot requisite. We defy any person practically acquainted with
Banking in Upper Canada, to assert that it is possible to carry on
Banking here except on the basis of a bona fide Capital, the business
to be in proportion to such Capital. We know that in England,
Banking is carried on with a merely nominal Capital, but the rea-
son is obvious. The security of the Joint Stock Banks is consider-
ed so good by Capitalists that in ordinary times they can borrow as
much money at 3 per cent per annum as they can lend at 4 or 5.
Thus they want no Capital, they re-discount the bills in London
Mrhich they discount in the country at a profit of 1 or 2 per cent;
and are thus enabled to make large profits with a small paid up
Capital, and this has been the cause of great overtrading in all
branches of business. Business of this description is unknown here
—we have no re discounting. The Banks do not, I believe, take
short paper from one another in payment of balances, added to
which, payments are more irregular than in England, so that the
Banks are even restricted within what might be considered the
legitimate bounds of their business. We presume our opponents
are not yet aniicipating the time when money shall be so plenty here
as to enable Banks to do a similar business. When it is, it may be
necessary to place some restrictions upon them. We must keep in
mind however, that chartered Banks can do such a business as welV
as priva';e ones, unless their irresponsibility should prevent their
getting ihe same credit.

2ndly. We are told that it should be insisted upon that the
whole Capital of these Banks should be paid up. We should be
tempted to ask an extensive importing merchant, who frequently
urges this restriction — whether he would prevent a customer of his
with a Capital of dfilOOO, from doing any business, because he an-
ticipated in a few years getting oClO.OOO mrre Capital, ard in the
liieantime could not make the large importations which the eminent ^
merchant alluded to is in the habit of making ?

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As well might he prevent this man from commencing business
till he had all his Capital on hand, as say, that a private Bank oom-
j)osed of persons associating together I'or Banking purposes should
have the whole Capital paid up before commencing.

We shall illustrate our argument by a case in point. The Capital
of the Farmers' Joint Stock Banking Company at the outset was
^£500,000. Had this been- all taken up, they would now have paid
in a larger Capital than any Bank in the province; but the intelli-
gent gentleman referred to would no doubt say, you must do no
business until every dollar is paid up. We contend that upon the
very principle laid down by our opponents, that of paid up Capital,
the People's Bank, whose liabilities to the public are probably not
a shilling for every pound of the Upper Canada and Commercial
Banks, is as saie as those great Institutions, while the additional
guarantee is afforded of the responsibility of the Shareholders.

3rd. We are told that in times of difficulty and embarrassment
the small Banks as they are called are obliged to sacrifice their cus-
tomers in order to protect themselves, and are quite unable to meet
any commercial revulsion such as has lately unhappily taken place
on this continent. Also that in times of prosperity these institutions
are a check upon the larger ones and prevent their issues being as
large as they otherwise would be.

We must again repeat that if a Bank trade upon its hona fide
capital, it cannot make any difference to the public whether that
capital is large or small. If the capital is too small to pay the ne-
cessary expenses of the business and yield a fair profit to the share-
holders they will have no object in carrying it on ; and in Joint
Stock Banks where all the partners are liable for the engagements
of the Bank there is little probability of the Directors engaging in
wild speculations or trading beyond their means, because the extra
profits can be of little consequence compared with the risk incurred.
Not so we believe with chartered Banks, the Directors know they
cannot lose more than their paid up capital, which is in many cases
merely nominal, and they are therefore more likely to run great
risks for the purpose of obtaining large dividends.

We contend therefore that a revulsion in business cannot embar-
rass a small bank one jot more than a large one: we deem it next to-
impossible that any Banks can sacrifice the interests of the commeF-'

cla! body more than the Chartered Banks have done in this Prov-
ince. We may also observe that during the present panic it does
not appear that the Joint Slock Banks have been less able to meet
these distressing times than the chartered ones. With regard to
the objection that in times of prosperity a number of Banks havo
the effect of checking issues, this complaint generally comes from
the advocates of one Mammoth Institution, and of course applies
equally to chartered and to Joint Slock Banks, and it has been a
strong objection made by the advocates of such a Bank against the
charters of small Banks throughout the Province. Now with re-
gard to this objection we hold it as an axiom that every Bank will
be anxious to keep up as large a circulation as it can with safety.
It is not therefore likely that in times of prosperity the legitimate
issues of any Bank will be materially checked by rival institutions ;
but it is of the utmost importance to the public safety that over issues
by any Bank should be promptly checked, and to do this the salutary
control of other Banks has always been found the most effectual
remedy. The very existence of Banking Institutions depends on
the public confidence, and every Bank is interested in having the
business safely and prudently conducted by other institutions.

Finally, we have heard it charged, and we know it is done by
those connected with the Chartered Banks, that the Joint Stock
Banks had no specie but what they obtained from the other Banks,
& they would therefore we presume imply that they had no capital at
all. We feel almost repugnant to use argument with people guilty
of the absurdity contained in this charge ; but it is such a favourite
oxie that we are compelled to notice it, This charge was first
brought against Messrs. Truscott, Green & Co. on their commenc-
ing their Bank in Toronto, by the friends of the Bank of U. C, and
a moment's consideration must convince every one of its absurdity.
That wealth consists of such commodities asareuseful — thatis, neces-
sary or agreeable to mankind — is one of the first truths of poli-
tical economy. The man who imports dClOO of British Broad Cloths
brings as much wealth as he who brings <£100 of British silver
coin. If then Messrs. Truscott, Green & Co. sold Bills of
Exchange to Merchants to pay for their cloths and flannels, they
• brought as much wealth to Upper Canada as if they had brought it
ia the 9bape of silver — they were paid for their bills in Bank paper,

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or tha representative of gold and silver, and were then abased for
demanding payment of those bills. In like manner the Stock of
the Farmers* and People's Banks was paid in and continues to be
paid in in paper of different Banks. Surely it is unreasonable in
these Banks to complain that their notes are taken and held as silver,
as were they not it would be because they were not considered to
be convertible into specie on demand. We shall illustrate our po«
sitJon by supposing that an individual in England with <£1000 in
gold should come to U. C. and invest saiu sum in gold in the Farm*
crs' Bank. Ii would not be denied by any one that this was so
much bona fide specie paid in ; but let us alter the case, the gentle-
man paid his gold to Thomas Wilson & Co. for the credit of the
Bank of Upper Canada. He arrives out, lets his money lie a few
months, and then buys Farmers' Stock. He goes to the Bunk of
U. C. to draw his deposit, who pay him in their bills, which he
takes to the Farmers' Bank and they of course convert them into spe-
cie. This however is no capital at all according to our logicians,
whose argument however only tends to depreciate their own paper.
We must however attend to the course pursued by the other Banks,
the Gore for instance. We have no means of knowing how the
Gore Bank got its specie, but we must assume that its capital was
paid in other Bank notes. We know its Cashier professed his un-
willingness to draw specie from any Bank. He must therefore
have got drafts on some place where he could procure it, say New
York. Now if these drafts were given him at par when they were
really worth 2 percent, we think theBank giving them must have been
badly provided with silver, for funds in New York are in all ordina-
ry times considered better than silver, inasmuch as they command a
premium varying from 2 to 4 per cent. If on the contrary the Gore
Bank paid the ^>remium for the draft, and also paid the expenses (A
importing the silver we are free to admit they carried their courtesy
to a great extent in paying 3 per cent for what they had a right to
get at par ; and we think they were scarcely warranted in subject-
ing their shareholders to such heavy loss; We admit, however,
SDch courtesy may have a good effect, and we believe the sftir<«
course has been pursued by the Bank of British North America at
great loss to themselves. They are importing their silver though
they coitkl import their capita) as well by selling exchairge. Ex-

ased for
Stock of
SB to be
nable in
as silver,
Jered to
I our po-
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le Fartn*
s was so
e genlle-
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which he
into spe-
logicians,
jfii paper,
ar Banks,
how the
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d his un-
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hey were
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ill ordina-
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T the Gore
tpenses of
r courtesy
a right to
in subject-
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nge. Ex-

thango Is now worth 15 per cent, so that a bill for i£100 sterling at
60 days' sight would give them here in cash ^£127 15 6 currency,
while cClOO of British silver would commanded 125, from which deduct
foroxpenscs, including interest of money, insurance, frelght,&c. at least
3 per cent, and we find they lose c£5 15 6 currency on every cClOO
sterling they import of silver, so that they have commenced their
operations by making a present of cC2000 or so, probably more, to
the other Banks, for which we hope they will bo excused any cen-
sure when hereafter in selling exchange the balances turn in their
favour. We trust we have made it apparent that when capital is
invested in Banking and paid up it makes no real difFerenoe whether
thespecie is imported fromEngland or New York, or brought through
the medium of Bills of Exchange, or taken from other Banks by
sending them in their bills.

Wo are not aware of any common objections made to Joint
Stock Banking which we have left unnoticed, and shall conclude
this part of our subject by expressing our surprise that the Banking
Institutions of this Province should be modelled after those existing
in the United States, instead of those in Great Britain and Ireland j
and although we admit, as before stated, that in England over-
trading has existed to a great extent, we deny that in Scotland or
the North of Ireland any charge has been made against the man-
agement of the Banks, and we feel satisfied that should any im-
provement be made in the system in England, the principle of full
responsibility on the part of the Shareholders will not be given up,
nor will it ever be required of persons wishing to associate for
Banking purposes to apply to Parliament for a special charter.

Having freely stated our opinions on the subject of Free Bank-
ing, we proceed to offer a few observations on the present position
of the different Banks in Upper Canada.

We must premise that during the last Session of the Legislature
a Restraining Law was passed, preventing any association of per-
sons or individuals from hereafter issuing paper, intended to circu-
late as money.

Five Banks were excepted from the provisions of this Act — four
Joint Stock Companies, viz., the Bank of B. N. America, thd
Farmers* Bank, the Bank of the People, and the Niagara S. B.
Bank^ and one private Bank, Messrs. Truscott, Green & Co^

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These Banks Iiad all gone into operation and the Shareliolders of
course had been at considerable expense in establishing them, so
that it was we presume considered, to be no more than just to allow
them to continue to hold the position which they had previously
done. Of the 5 Banks above mentioned the Branch of the Bank of
British North America, here, has not yet got into operation^

The public attention has been so long anxiously directed to tlie
state of the money market in the United States, that we need only
remind our readers that after a complete prostration of individual
credit in the atlantic ciiies, such as has perhaps, never been before
experienced, the Banks in New York and subsequently all through-
out the United States, were obliged to suspend specie payments
early in May. The panic consequent on this act soon spread to the
Canadas, and was in this Province materially assisted by articles
published in the Constitution newspaper of this City, in whiclT the
public were warned of the doubtful solvency of the Banks and
urged to turn their notes into specie without loss of lin^e.

"We are aware that during this run, a feeling of hostility has
sprung up between the Joint Stock Banks and the Bank of Upper
Canada, which certainly never before existed on the part of ther
former, and we are not aware that it did so on the part of the lat'cer.
We proceed to consider the cause of this hostility, and to shew
that if it docs exist, the Joint Stock Banks have neither wilfully
provoked it, nor have they ever been anxious to keep it up. The
custom with Banks everywhere, is to exchange their paper at stated
intervals and to settle the balances either in specie or by drafts at
sight on some place where it suits the receiving party to place funds
—there is usually an agreement subsisting to this effect. This is
the way the chartered Banks settle their balances, and the Joint
Stock Banks and Messrs. Truscott, Green & Co., have settled with
one another on the same terms, usually however, paying balances
in notes of Uie chartered Banks which they . ?2c^ ;ved and held as-
specie.

It would have been perhaps better had these Banks come at
once to an understanding with the Bank of Upper Canada, whose
paper was generally held, as being most easily converted, and bad
their balances settled weekly*

11

It was, however, no gain to them to hold the paper, and they re-
frained from asking a settlement solely from an unwillingness to
give any cause of offence. The Bank of Upper Canada must, how-
ever, have been aware that both the Farmers' and People's Bank
held balances against them for the past year, and had they made
enquiry they would no doubt have been informed of the amount.
Had they wished for a settlement, they might have proposed some
plan for settling balances which we feel satisfied would have been ac-
ceded to by the others. We are sure no friend of the Upper Canada
Bank will assert that that Institution would have held over paper of
the Joint Stock Banks for months, the balance on the two Institu-
tions varying from aC5000 to ^15,000, and if not why are the Joint
Stock Banks to be blamed for asking a settlement which would have
been rigidly exacted from them.

The truth, however is, that before any demand for silver to any
extent was made upon the chartered Banks, the Upper Canada and
Commercial Banks, simultaneously sent instructions to their agents
to refuse the notes of the private Banks. This we assert, was the
first act of hostility.

In an official letter the Bank of Upper Canada say, that this
order arose " from the unprecedented demand for silver, and was
■** not intended to convey any insinuation of the stability of other
** monied Institutions." It is also well known that for several
months back, they have made a difference of 1 or 2 per cent be-
tween their own notes and those of other Banks in selling silver or
drafts on New York. The avowed object of this policy was to re-
duce their circulation. Now we appeal to every intell-gent man
in the comm^^nity, whether the proper way to attain this object
would not have been, to have received the paper of the Banks
holding the balance against tliem on the same terms as their own,
both in Toronto and at the agencies, which would have had the
Bame effect in reducing their circulation and would at the same
time have induced the balance held by the other Banks. Instead
of pu'-guing this straightforward course, the Bank of Upper Canada
took every means to increase the balance held by the Joint Stock
Banks, by ordering their agents not to take their notes and a 'g
2 per cent more for changing their notes than their own.

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It must be obvious to every one that the effect of refusing the
notes of the Joint Stock Banks at the agencies of the chartered ones
must in such times as the present have had the effect of creating
a distrust of those Banks. This they say was not the intention,
but surely it would have been but common courtesy to have ap-
prized these Banks that such a course was about being pursued.
It must likewise be recollected that the suspension of specie pay-
ments was generally spoken of, and it was publicly rumoured that
the Executive of the Province had it in consideration whether such
a course should not be sanctioned. Under all these circumstances
we ask every impartial man in the community, was it to be expected
that the Joint Stock Banks should hold the notes of the Bank of U.
C. as specie 1 and yet their sending these notes in for payment is
the only act of hostility which can be charged against them. On
the other hand we charge upon the officers of the Bank of U. C.
that they first issued instructions to refuse paper which they had
been in the habit of taking without notice, & without any sufficient
reason, and also that they trealed with marked disrespect those per-
sons sent on behalf of the Joint Stock Banks to obtain payment of
their balances, and even went so far as on one occasion to refuse their
own paper in exchange from the Farmers' Bank. We must con-
clude this justification of the Joint Stock Banks during the late
panic with disclaiming on their part and their friends the slightest
wish to provoke hostility, or to act in any way calculated to give
offence. We ask for them fair play and no more, and we trust we
shall not in vain appeal to Britons for simple justice. '•

We now approach the most important part of our subject, namely,
the consideration of the course which ought to be pursued by the
Legislature during the ensuing session. We hold our opinions on
this subject with great diffidence, and can ha-dly help admit-
ting that we almost yield our judgment to the general wish of the
community. We deem it to be beyond dispute that the demand
for silver for exportation must have the effect of withdrawing from
circulation a large amount of the notes of our Banks. We are pro-
bably not far astray in estimating the circulation of the different
Banks at about oCSOO.OOO. Now if this should bo in a few months
reduced tu one half, the Banks must curtail their discoants ce250,Q00

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13

)g the
?d ones
reating
ention,
ve ap-
arsued.
e pay-
id that
er such
stances
Kpccted.
kof U.
ment is
m. On
if U. C.
ey had
ufticient
ose per-
ment of
use their
ust con-
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trust we

, namely,
i by the
nions on
n admit-
sh of the
demand
ing from
3 are pro-
different
V months
«250,Q00

and the effect of this would, we believe, be that a number of :<ol-
vent merchants in the province would have to yield to the pressure.
We have never thought the interests of the mercantile commu-
nity sufficiently attended to by the Banks in this province, and wo
would on the present occasion strenuously insist that whatever
course may be adopted their interests should not be lost sight of.
If it is possible consistently with a proper regard for their interests
that the Banks can continue specie payments it would be most de-
sirable that it should be done. The province would hold a proud
position if it could maintain the credit of its institutions amid the
dreadful crash which has taken place on every side. Should it
however be found impossible to follow this course, we would most
strongly deprecate the mere legalized suspension of cash payments.
We would earnestly implore the Legislature to pause before they
adopt a course so fraught with ruin to the whole community.
Should this suspension take place Bank paper will be depreciated
never again to regain its credit. The debtor will find that his cre-
ditor will refuse payment in the only currency he can obtain, and
we shall be in the same condition as the United States, where it is
impossible for 24 hours together to know what paper a man can pay
his debts in.
^We are credibly informed that Bills of the United States Bank
have been refused in payment of notes, and that the debtor, who
offered them in payment, had to stand a suit for the debt.

If we are not able to continue specie payments, let us at least
have some description of paper made a legal tender during the
suspension. We are unwilling to give an opinion as to whether this
paper should be that of the Bank of Upper Canada alone, or al! the
Chartered Banks. If it was possible that the Chartered Banks
could come to an understanding, we hold that only one description
of paper should be legalized as a tender, but we confess v/e see
difficulties in the way of such an adjustment, which we fear are
insurmountable ; and it may, therefore, be neces&ary for the three
Chartered Banks to be put on the same footing. Shoi^ld this plan
be adopted, the Legislature will of course see the propriety of
having stated returns of the circulation published at intervals, and
of limiting within proper bounds the extent pf circulatiop.

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14

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Wc feel great reluctance in admitting that any circumstances

sliould occur to render such a course as that described necessary,

and we cannot yet say, wc are satisfied that it is so, but we do clearly

perceive that the credit of our institutions, and the interest of the

community at large, require that a different course should be taken

from that adopted in the United States, which we know has not

worked well. The plan we recommend is a desperate remedy for

th*^ existing disease, and if adopted, will require every guard that

can be thought of to restrain the Bank issues within bounds, so as to

enable them to return to cash payments as soon as possible. This

course too, we believe, would be better than issuing the paper of

Banks which have suspended specie payment, a course which we

do not believe will ever be sanctioned by an intelligent people. —

We are far from wishing to disparage the paper of the Lower

Canada Banks — we have no doubt of their stability — but we think

that they themselves can hardly approve of their paper being

forced into circulation at a distance, among a people whose

confidence in their own Banks has been, to say the least, shaken.

The attempt to legalize the suspension of specie payments,
on the part of the Chartered Banks, without making paper a
legal tender, would, as we have already stated, inflict serious
injury on the community at large, but would press with the
greatest severity upon the Joint Stock Banks. It must be
recollected that 66100,000, or upwards, of debts, will be falling due
to these Banks during the ensuing three or four months ; and w^e
would ask, can these Banks receive, in payment, the paper of
suspended Banks, of which they can make no use, while they are
obliged to meet their own paper with specie *? It will be impos-
sible for them to do so, and they will, therefore, be compelled to
collect their debts in specie, to the serious loss of tlieir debtors. —
So dreadful has been the inconvenience caused by the legalized
suspension in the United States, thait in New Jersey we observe
abill has been introduced, compelling the Sheriffs to stay executions
where the prosecutor demands gold and silver, such execution not
to be enforced until he retracts. We entreat our readers to mark
the consequence, a man is obliged either to lie out of his money,
or to take paper of which he can make no use, not being a legal
tender, while the debtor is sued and unable to satisfy his debt with

h

1^

the only currency he can procure. The evil consequences in thi»
province will not, however, be confined to the Joint Stock Banks
and the comnnunity at large, but will seriously affect the Free-
holders Bank as well as the other new Banks, whose charters have
not yet been assented to. We ask the friends of these Banks, if the
charters are assented to, how they can get their stock taken up,
while this suspension exists ? If the Chartered Bank paper should
be made a legal tender it will, for the present, suit them as well to
get their stock paid up in that paper, as in specie ; but without
our having notes of some description made a legal tender, it will
be impossible for these Banks to get into operation. It may be
said that the suspension will not last long, a few months perhaps,
or a year, but we can instance the example of the Bank of England,
to shew the great difficulty of resuming cash payments, after a sus-
pension has once taken place, and we would ask how could business
have been carried on in England, had there been a mere suspension
without the paper of the Bank of England having been made a
legal tender? The friends of the new Banks about beings
established at Toronto, Sandwich, Niagara, St. Catharines, Cobourg,
Pnnce Edward, Brock ville, and Prescott, may depend upon it, that
any measures which tend to give additional power to the existing
Chartered Banks, will have the effect of injuring their interests.
They already know the hostility felt by these institutions, or some of
them, to the passing of their Charters, and they may depend upon it^
that th hostility remains unabated, and the surest way to prevent
these institiutions now going into existence, is to pass any measure
which will encrease the influence of the present Chartered Banks.
We wish not, nor have we advocated any measure, to injure these in-
stitutions, but we cannot see the propriety of exalting them too much.
—Before leaving the subject, we may remark tl>at we have heard
it suggested that the government should issue debentures for small
•mounts, say as low as four or five dollars, not bearing interest, which
should be a legal tender. This proposition would in some respects
answer better than allowing any description of Bank paper to be a
legal tender, as such debentures would command greater confidence
in the country, and it is therefore well worthy the serious consider^
ation of the Legislature*-

!i

16

We hold it to be tlie duty of the government to provide a sound
currency for the country if it is necessary to restrain the Banks
from paying in specie. The reason we would at all admit the
propriety of making the Chartered Bank paper a legal tender, is that
those Banks have already been taken under the protection of the
government.

His Excellency the Lieutenant Governor has authorized all pub-
lic officers to take their notes, and has used all his influence to assist
them. We assume therefore that the government have means of
knowing the perfect solvency of these Banks, and that therefore
the Legislatnre may fairly consider the Executive responsible that;
their paper if legalized will prove a sound currency.

Holding these views then we refrain from giving any decided
opinion as fo whether Government Debentures, U. C Bank paper,
or the notes of all the Chartered Banks should be legalized as a ten-
der ; but we feel satisfied that the interests of the country require
that one of the three courses should be followed, if it is thought
necessary that there should be a suspension of specie payments
at all.

We conclude our observations, trusting we have written nothing
calculated to give offence to those who differ from us, of whom we
adroit there are many whose opinions we highly respect. We leave
the subject in the hands of the Legislature who will we trust weigh
well every argument which can be adduced on both sides, and we
trust that an over-ruling providence may guide them to a wise
legislation on this all important subject.

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